Why Genomic Health, Inc. Skyrocketed Today
Genomic Health (NASDAQ: GHDX) is up 21% at 1:12 p.m. EST Thursday after Bloomberg reported that the cancer test company is contemplating selling itself after receiving takeover interest.
While it's always possible that someone at Genomic Health has gone rogue, telling Bloomberg things that aren't actually true, it's more likely that the rumor of takeover interest has some basis to it. Companies often leak information of a potential suitor to the media -- sometimes through their investment banker -- to drum up interest from other potential acquirers. Even if no companies bite, the current suitor may raise the bid on just the threat of a bidding war.
Having the news out there also helps Genomic Health's board of directors gauge investors' thoughts on a sale. Management can't just call up investors and say, "We've got an offer, what do you think of it?" without running into insider trading issues. But once the rumor is out in the public, investors can call management expressing their feelings.
Source: Fool.com
